By Karen Crump
What’s your favorite past time?
Mine is shopping…
I enjoy shopping for special occasions – birthdays, holidays, household decorations and of course shopping for new clothes. Shopping also known as “therapy” makes us feel good and that can explain why consumer spending makes up 2/3 of GDP (gross domestic product). Well, no, that is not really the explanation but we the consumers do like to spend money. So, when I hear the headline news report the U.S. economy is slowing down and the retail sales numbers indicate this, I do not react. Cycles have specific purposes and I always say, the news reports specific headlines and as readers, we should found out the whole story before reacting.
The economy has three levels of economic market indicators to assist in direction of the market; Leading, Lagging and Coincidental. Retail Sales (a coincidental indicator) used as a measure of consumer spending includes sales from components you may not expect to be included – like gasoline sales. Gasoline sales are based on the price of gas we pay at the pump. So if gas prices go down, so does overall measure of retail sales unless something else can make up the difference. Gasoline prices have indeed gone down and we consumers say “yes” it is about time. This provides more money in our pockets to be spend on something we want to buy, not necessarily have to buy. I see this as a positive. So if retail sales slows down and it is because of lower gasoline prices, let it happen.
Apparel trends come and go and these are good for clothing and accessory companies. The industry is always looking for new products or what will be the latest fashion. Investing in some of these companies might bring appreciation to a portfolio. For accessories, think of Tiffany & Company (TIF). They have a well-managed business with new products and pricing power. North Face, Vans or Timberland are a few brands owned by VF Corporation (VFC). They too have a well-managed business with new products. Lastly, I want to mention my all-time favorite consumer spending stock, Nike (NKE). Nike dominates the athletic arena with product innovation in footwear, apparel and equipment. If you do not want to do individual stock research but wish to own retail stocks, I recommend purchasing the Consumer Discretionary sector spider through an Exchange Traded Fund (symbol XLY). You will own more than 25 individual stocks exposed to the consumer.
The latest buzz I heard on upcoming new fashion…
The 1970’s are coming back around again and this time with Bell Bottom pants! Some may say we already have them with the flare in pants now but what one must remember about Bell Bottoms is the flare begins from below knee not the ankle. Sometimes it is best to go against the tide when you believe it is a short term situation. Retail shopping can be “therapy” and a winning situation if invested appropriately in a portfolio.
Good luck and know what you are invested in.